PURPOSE PRICING
The idea briefly explained.
Die Sache mit dem Purpose
The topic of purpose has become increasingly important in recent years. Management thinkers, consultancies and CEOs argue that "shareholder value" can no longer be the sole objective for the orientation of companies. Rather it is about establishing the purpose, i.e. the social added value that a company creates or strives to create, as a central orientation element.
Larry Fink, founder and CEO of the world's largest wealth manager BlackRock, has been emphasizing the importance of purpose for companies for several years. In his annual “Letter to CEO”, he wrote that it is not enough for companies to be financially successful, but rather that they have to contribute something to society. In the meantime, this actually seems to have reached the majority of company leaders. According to the ’CEO Purpose Report 2022’ 83 percent of CEOs surveyed say they have or are striving for a purpose statement. 73 percent of CEOs stated that their purpose now influences the majority of their decisions.
The Price is Right
Pricing policy occupies an important position in business administration and management literature, as it represents a central area of corporate management due to its direct influence on profitability. In the models taught, prices are usually geared towards maximizing sales, profit or market share, depending on the strategic focus. The determining overriding goal for such targets continues to be the optimization of shareholder value.
Pricing needs Purpose
If companies are serious about their purpose, i.e. really aim for a higher corporate goal, this should also be taken into account in the pricing policy. Purpose-oriented corporate management requires purpose-based pricing concepts.
In relationships with customers, but also with employees and suppliers, the price charged for a service plays an elementary and often decisive role. When Blackrock CEO Larry Fink writes that companies should base their relationships with their stakeholders on the basis of their purpose, one can deduce that this also includes pricing policy.
PURPOSE PRICING
PURPOSE PRICING stands for purpose-oriented pricing. With purpose-based pricing, an economically viable calculation is linked to the higher goals of a company. In addition to the purpose of a company, the motives, actions and possibilities of the customer can also be individually considered in the pricing. PURPOSE PRICING can thus also be used as an incentive tool to reward behavior that is in line with the company's purpose.
PURPOSE PRICING is diverse in its possibilities and needs to be designed individually for a company. The company purpose, the range of products and services, the brand promise, the economic realities, the market position and the customer relationships play decisive roles.
PURPOSE PRICING enables providers to fully live up to their purpose. The fact that such a stringent and resolute approach to one's own purpose has a positive effect on the radiance of one's own brand, customer loyalty and ultimately also shareholder value is obvious, but not an end in itself.
Witten by Michel Harms.
„Putting your company’s purpose at the foundation of your relationships with your stakeholders is critical to long-term success.“
Larry Fink, CEO of BlackRock
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